The first privatisation by the Government was confirmed yesterday with the long expected announcement that defence firm Qinetiq is to finally float on the stock market next month.
Qinetiq, which is 56 per cent owned by the Ministry of Defence, said both the MoD and private equity investor Carlyle would raise a "significant" amount when they sell part of their holdings.
Defence Secretary John Reid said the flotation - which will value the business at more than £1 billion - was the best way for Qinetiq to develop its expertise as a supplier to the armed forces.
Mr Reid said: "The Government will retain a significant stake in the company, which will ensure that the taxpayer will continue to benefit after the flotation.
"The Government will also retain a special share in the company to ensure that the UK's defence interests are safeguarded."
It will be Labour's first full privatisation since Tony Blair came to power in 1997.
Qinetiq employs more than 9,000 staff across the UK at locations including Bristol, Bedford, Rosyth in Fife and Malvern in Worcestershire.
Its products range from sensors and software for military chiefs to advanced security systems to protect financial firms from fraud.
However, the flotation will net Carlyle, which bought its 31 per cent stake in 2002, a multi-million profit - prompting criticism from both opposition parties and unions.
Shadow defence minister Gerald Howarth feared the sell-off was a "desperate move to provide a quick buck" for Chancellor Gordon Brown.
Liberal Democrat treasury spokesman Vince Cable called for an investigation into whether the Carlyle stake was handed over far too cheaply.
Bought for £42.2 million, it is expected to be worth £341 million when Qinetiq is floated. Mr Cable said: "I would not say it's a scandal but it is seriously worrying as to how this company was allowed to make an enormous profit as a result of being the single bidder for its stake in Qinetiq.
"I am seriously worried that the Government massively miscalculated the value of its old assets and has sold the taxpayer short."
Prospect, the union representing 3,000 Qinetiq work-ers, also demanded that they be given a fair share of any proceeds from the 13 per cent of the firm allocated to employees.
It fears three quarters are unlikely to see any benefit while senior managers could pick up millions of pounds. Prospect's national secretary, David Luxton, said: "Senior managers are going to have to explain to staff why such large returns have been confined to so few.
"The disparity in the distribution of shares amongst employees (which was decided by the Carlyle Group) is a lost opportunity to reward all Qinetiq staff who have contributed to the success of the company.
"Most Qinetiq staff were not given the opportunity to purchase the highly geared share options available to senior management that will now generate a massive windfall on flotation."
Qinetiq expects to net some £150 million from the flotation, which it will use to grow both organically and through "appropriate" acquisitions. It will also use £45 million to reduce the deficit in its defined benefit pension scheme.
Chairman Sir John Chisholm said: "We are well on the way to delivering our founding ambitions of linking defence and civil technologies to create a successful, vibrant and growing organisation meeting the needs of governments and companies in facing the challenges of today's world. The IPO will mark a watershed in our development."